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S&S Benefits.....Opinion, Hearsay & News Review

S&S Benefits Consulting, Inc. 219 Darien, Dundee, IL 60118 Phone: 847-428-5353, Fax:847-428-9876,

Email: jseiler@ssbenefits.net www.ssbenefits.net June 2004 Issue


Despite the pitfalls, employers appear to be embracing (or saying they are going to embrace) CDHC plans. A recent survey by Mercer showed that 73% of 991 employers surveyed showed interest in adopting the plans. However, 39% did not plan on putting any money into HSA plans to go with the higher deductible. 24% would put in $500 of a $1,000 (or more) deductible if they offered such a plan.

About 70% of employers offer vision care, primarily through voluntary programs. 31% offer a fully employer paid program, 37% were partially contributory and 32% required employees to pay the full cost.

UnumProvidentís quarterly loss more than doubled as it wrote off various assets associated with unprofitable individual policies it wrote in the mid-1990ís. Company officials stated that taking the loss was part of the prior plan Unum had announced to increase profitability in the future.

New York and Connecticut have launched investigations into broker fees. One of the issues seems to be receiving consulting fees for clients and also receiving override commission when placing business for those clients. The other issue seems to be the legitimacy of accepting override fees in general. Some argue that overrides are legitimate rewards for long relationships and are based on overall business volume built through trust in certain relations between brokers and carriers. Others say that overrides need to be disclosed and should not be paid in addition to normal agreed upon compensation. NY and CT are demanding records from companies such as Willis, AON and Marsh. Overrides are commonplace in the insurance business, although we are generally not a believer in the system. Although there are reasons why overrides can be good, we also know that many brokers place business based almost solely on their override agreements rather than finding the best for the customer.

Aonís spring trend survey shows the following annual trends (including Rx for medical): HMO-14.1%, POS-14.1%, PPO-14.2%, Indemnity-15.3%, DHMO-5%, DPPO-7.3%, Dental Indemnity-7.7%. Rx stand-alone is 14.4% and vision is 3.9%. Once again, a reminder is needed that these are annualized Average trend figures from a variety of carriers. Actual trend used in renewal rate projections is for a longer period of time. That period is usually from the mid-point of the current year to date experience period to the mid-point of the renewal year.

Weiss Safety ratings reviewed 487 HMOs and 67 received upgrades while only 7 were downgraded. Thatís not surprising since HMOís in general posted a 52% increase in profits in 9 months of 2003 vs. the same time frame in 2002.

Caremark Rx (including Advance PCS) leads the way with 20.93% of the PBM market. Medco follows them at 12.68% and Express Scripts at 10.57%. Most other PBMs are much smaller, but in our experience provide better service and reporting.

Fortis (Assurant) has announced that the new dental coding will be changed to reflect HIPAA and ADA rules effective on August 1, 2004. The changes will affect the industry as a whole and you can expect changes in dental coding to affect all dental plans.

Spending on drugs used to treat younger children is increasing dramatically according to a study by Medco. There was a 77% increase in spending on drugs for behavioral modification in youths age 19 and under between 2000 and 2003! Are our children that much more sick, or is it the adults?

Hospital spending increased 9.35% in 2002, for the 4th consecutive year of accelerated growth. Rx decelerated slightly and physician services grew by 7.7%.

JAMA says that doubling copayments on RX reduced drug spending between 19% and 33% and also led to reductions in use of several medications. For instance, anti-inflammatory use dropped 45%, antihistamines-44% and anithyperlipidemics-34%. Patients diagnosed as having chronic illness and receiving ongoing care were less likely to reduce their use of medications.

The DOL has released final COBRA regulations for plan years beginning on or after November 26, 2004. Plans on a calendar year basis must follow the regulations beginning on January 1, 2005. We have a pdf file from the DOL that contains the regulations and Model notices if you wish to receive it via email.